DISPUTE SETTLEMENT

Note

This summary has been prepared by the WTO Secretariat’s Information and External Relations Division to help public understanding about developments in WTO disputes. It is not a legal interpretation of the issues, and it is not intended as a complete account of the issues. These can be found in the reports themselves and in the minutes of the Dispute Settlement Body’s meetings.

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DS524: Costa Rica — Measures Concerning the Importation of Fresh Avocados from Mexico

Mexico submitted its second request for a panel to rule on Costa Rica's import restrictions on fresh avocados from Mexico, following Costa Rica's decision to block Mexico's first request at the DSB meeting on 4 December. Mexico is challenging measures which ban or severely limit the importation of fresh avocados from Mexico, including certain procedures related to the control, inspection and approval of the avocado imports as well as Costa Rica's alleged failure to adapt its regulations to take account of the low prevalence of pests or disease in certain regions and make such regionalization operative. 

Mexico noted that Costa Rica is a trading partner distinguished by its commitment to free trade and that it had been exporting fresh avocados to Costa Rica for more than 20 years without any problem. Mexico said it has no choice but to request the panel a second time to review its claims.

Costa Rica said it regretted Mexico's decision to pursue a panel and said it saw no reason for it, particularly in light of a bilateral agreement recently signed by Mexico and Costa Rica establishing a joint technical work programme aimed at resolving the dispute. Costa Rica said its measures were fully in line with WTO requirements and backed by WTO-consistent risk assessments.

The DSB agreed to the establishment of a panel. China, India, the United States, Panama, Honduras, Canada, Russia and the European Union reserved their third-party rights to participate in the proceedings.

DS566: Russian Federation — Additional Duties on Certain Products from the United States

The United States submitted its second request for a panel regarding Russia's imposition of additional duties on certain US products. The first US request was blocked by Russia at the DSB meeting on 4 December.

The United States said Russia and several other WTO members are unilaterally retaliating against the US for actions fully justified under Article XXI of the General Agreement on Tariffs and Trade (GATT) 1994. These members are pretending that the US actions are safeguards and that their unilateral, retaliatory duties constitute suspension of substantially equivalent concessions under the WTO's Safeguards Agreement. Just as these members appear ready to undermine the dispute settlement system by throwing out the plain meaning of Article XXI and 70 years of practice, so too are they ready to undermine the WTO by pretending to follow WTO rules while taking measures blatantly against those rules. The US has not utilized its domestic law on safeguards to take the actions, and WTO rules on safeguards are not relevant to the US actions. Russia's duties are nothing more than duties in excess of its WTO commitments and are applied only to the US, contrary to Russia's most favoured nation (MFN) obligation, the US said.

The Russian Federation said it was disappointed with the second US request and bewildered to hear that it was Russia undermining the dispute settlement system when it is the US arbitrarily imposing additional duties on steel and aluminium and using them as a means to secure trade concessions from certain members. Due to the efforts of the US to "improve" the dispute settlement system through paralysis, the US is the last member to win the title of guardian of the system, Russia said. The actions of the US are yet another effort to turn the WTO house upside down.

The European Union noted the US request is similar to those the US made with regards to four other WTO members and which were approved at a DSB meeting on 21 November. The EU welcomed the fact that Russia, like quite a number of other WTO members, resorted to its right to suspend equivalent obligations vis-à-vis the US and looks forward to defending its right, and the rights of other WTO members, to take such action.

The DSB agreed to the establishment of the panel. Japan, Saudi Arabia, the European Union, Norway, Switzerland, Brazil, Qatar, Thailand, Singapore, Indonesia, Mexico, Chinese Taipei, Turkey, Venezuela, Egypt, Canada, Kazakhstan, India, Malaysia and New Zealand reserved their third-party rights to participate in the proceedings.

DS567: Saudi Arabia — Measures concerning the Protection of Intellectual Property Rights

Qatar submitted its second request for a panel to review its claims that Saudi Arabia has failed to provide adequate protection of intellectual property (IP) rights in line with the WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), in particular with respect to IP rights held, or applied for, by Qatari-based entities. Qatar's first request was blocked by Saudi Arabia at the DSB meeting on 4 December.

Qatar said its firms not only were denied access to remedies in Saudi Arabia to protect their IP rights, but that Saudi Arabia was actively abetting commercial-scale broadcasting piracy, including piracy of licensed content, and permitting the sale of set-top boxes that allow access to hundreds of proprietary channels and thousands of programmes without the consent of rights holders. This is something that should be addressed through the Saudi domestic courts and criminal system as required by the TRIPS Agreement, but with these IP violations continuing unchecked for more than a year, the WTO is one of the few forums left open to Qatar to address this dispute. Qatar said the absence of diplomatic relations with Saudi Arabia does not render WTO dispute settlement impossible; such relations are not required in order to engage in dispute proceedings.

Saudi Arabia said it deeply regretted the second request for a panel for a matter which has no legitimate connection to the WTO or to compliance with WTO rules. Establishing and maintaining diplomatic relations between nation states is a fundamental exercise of state sovereignty; the WTO and the WTO agreements cannot infringe upon that. Saudi Arabia severed diplomatic relations with the complainant in June 2017 in order to protect its essential security interests, which renders impossible dispute settlement proceedings. Article 73 of the TRIPS Agreement cannot oblige a member to engage in dispute proceedings on matters of national security and a panel has no power to make a finding other than to acknowledge that Article 73 has been invoked.

Saudi Arabia reconfirmed that it fully respects all obligations that apply under the WTO agreements, including the TRIPS Agreement. The WTO cannot be turned into a venue for resolving national security disputes, and Saudi Arabia will not engage in dispute proceedings with a party it does not recognize diplomatically.

The United Arab Emirates said the matter relates to national security under Article 73 of the TRIPS Agreement and that a panel has no proper jurisdiction to hear the dispute. Bahrain said issues related to national security cannot be resolved in the WTO and that, because Saudi Arabia invoked Article 73, the panel has no basis to review the claims.   The European Union said that views regarding the panel's jurisdiction or authorization over certain issues can be brought before the panel to decide; the national security provisions are GATT and TRIPS exceptions and, therefore, justiciable for panels and the Appellate Body.

The United States said invocation of the national security exception under Article 73 is self-judging and that members decide themselves what is in their national interest; this matter should be resolved outside the WTO dispute settlement context. China said security provisions are sensitive provisions relating to sovereignty and should only be invoked to safeguard genuine national interest and be implemented in a cautious manner. Canada said that when a country becomes a member of the WTO it accepts the compulsory jurisdiction of the dispute settlement system and that that authority of a panel to adjudicate is not negated by the absence of diplomatic relations.

The DSB agreed to the establishment of a panel. The European Union, India, Japan, China, the United States, Australia, Turkey, Norway, Mexico, Russia, Bahrain, Singapore, Chinese Taipei, the UAE and Korea reserved their third-party rights to participate in the proceedings. 

DS543: United States — Tariff Measures on Certain Goods from China

China submitted its first request for the establishment of a WTO panel to rule on tariffs imposed by the US on imports of Chinese goods under Section 301 of the US Trade Act of 1974. The tariffs were imposed on the basis of an investigation by the US Trade Representative concerning alleged acts, policies and practices by China related to technology transfer, intellectual property and innovation. The US imposed 25% additional tariffs on approximately $34 billion of Chinese imports from 6 July 2018 and imposed 10% additional tariffs on approximately $200 billion of Chinese imports from 24 September 2018. 

China said it first requested consultations on the matter in April and that talks were held on 28 August and 22 October, without success. The US measures at issue affect significant trade interests of China, touching thousands of tariff lines worth hundreds of billions of dollars in trade, further worsening the global economic and trade environment, and damaging global industrial supply chains around the world. The unilateral actions by the US not only infringe China's rights and interests but also flagrantly violate WTO rules. The WTO is a shield for members to defend themselves against trade protectionism, not a shield to hide any measures that go against WTO rules, China said, adding that the unilateral tendencies of the US is of serious concern to all members. 

The United States said it had serious concerns with China's request for a panel. First, China is seeking to use the dispute settlement system as a shield for a broad range of trade-distorting policies and practices not covered by WTO rules, threatening the overall viability of the WTO system. Second, China's request is hypocritical; it is currently retaliating against the US by imposing duties on over $100 billion in US trade. Third, the outcome of any dispute proceedings would be pointless; China has already taken the unilateral decision that the US measures cannot be justified and is already imposing tariffs on US goods. China's unfair trade practices with respect to forced technology transfer are well-documented and spelled out in a comprehensive March 2018 report. A supplemental report was issued in November explaining that China has not fundamentally altered its practices subject to the earlier report, practices that harm every WTO member that relies on technology for maintaining competitiveness in world markets.  The leaders of the US and China have agreed to enter into negotiations to address these issues, and it is those discussions, and not the WTO dispute settlement proceedings, that are the appropriate forum for addressing the technology transfer issues covered by the US investigation. For these reasons the US said it will not agree to the establishment of a panel.

Japan said any trade measures must be consistent with the WTO agreements and that no country benefits from exchanges of trade-restrictive measures and counter-measures taken against each other.

The DSB took note of the statements and agreed to revert to the matter.

DS234: United States – Continued Dumping and Subsidy Offset Act of 2000

The European Union reiterated its request that the United States cease transferring anti-dumping and countervailing duties to the US domestic industry, arguing that every such disbursement was a clear act of non-compliance with the DSB's recommendations and rulings on the matter. Brazil and Canada agreed with the EU that the matter should remain on the DSB agenda and called on the US to fully comply. The United States referred to its previous statement and said it had taken all action necessary to comply with the DSB's recommendations and rulings.

DS316: European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft: Implementations of the recommendations adopted by the DSB

The United States again said the European Union has not provided a status report concerning the dispute DS316, "EU — Measures Affecting Trade in Large Civil Aircraft". The EU has argued that Article 21.6 of the WTO's Dispute Settlement Understanding (DSU) requires that the issue of implementation remain on the DSB agenda until the issue is resolved and that where a member disagrees with another member's assertion that implementation of a ruling has been achieved, the issue remains unresolved for the purposes of Article 21.6. The stated EU position contradicts its actions in this dispute, the US said, where the EU has admitted that there remains a disagreement on compliance. Under the EU's own view, the EU should be providing a status report, yet it has failed to do so. The US urged the EU to provide the DSB for the first time any details on its alleged implementation efforts.

The European Union said there was a difference between the position it has taken in the DS234 and DS316. In the former, the case has been adjudicated, no proceedings are pending, and the EU disagrees with the US assertion that it has complied; thus the issue remains unresolved for the purposes of Article 21.6. In the DS316 case, the EU notified its compliance measures, the US disagreed that compliance had been achieved and a compliance panel has been established to rule on the matter. The matter is subject to litigation and the EU is concerned with a reading of Article 21.6 which would require a member to notify the status of implementation while litigation is ongoing.

Statement by the United States on the precedential value of panel or Appellate Body reports

The United States made a lengthy statement in which it criticized the WTO's Appellate Body "misguided insistence" that its rulings must serve as precedent "absent cogent reasons". This issue is of fundamental importance to the WTO, the US said; the Dispute Settlement Understanding (DSU), the WTO's rule book for resolving disputes, does not assign precedential value to panel or Appellate Body reports adopted by the DSB. The right to adopt authoritative interpretations of WTO rules is reserved exclusively to WTO members through the Ministerial Conferences or the General Council. Nevertheless, the US said, the Appellate Body has suggested that a panel must follow a prior Appellate Body interpretation absent "cogent reasons" for departing from the earlier interpretation, without any justification or legitimate basis for this interpretation. 

Not treating interpretations in a ruling as controlling or a precedent is consistent with the treatment of rulings under the previous GATT dispute settlement system and something the Appellate Body initially acknowledged in one of its earliest rulings (DS11,  Japan — Taxes on Alcoholic Beverages). However, in a subsequent ruling (DS344, US — Anti-Dumping Measures on Stainless Steel from Mexico), the Appellate Body adopted a contradictory position and first introduced the concept of "cogent reasons"; specifically, the Appellate Body said that ensuring security and predictability in the dispute settlement system, as contemplated in Article 3.2 of the DSU, implies that, absent cogent reasons, an adjudicatory body will resolve the same legal question in the same way in a subsequent case.  This approach is fundamentally flawed and at odds with the text of the DSU and the WTO Agreement, the US argued.

In several recent panel reports, the US said, certain panels have simply applied the Appellate Body's pronouncement on "cogent reasons" and failed to engage with the legal text of the DSU and WTO agreements. This raises grave concerns for the dispute settlement system as it suggests that serious, systemic errors are increasingly being made without any consideration of the actual text the WTO members have agreed to. This practice usurps the authority reserved only for WTO members to adopt authoritative interpretations of WTO rules and is another example of the failure of the Appellate Body to follow the rules agreed to by members, the US said.

Colombia, Chile, Canada, Brazil, Australia, Japan, Singapore, the Philippines, Mexico, China, New Zealand and the European Union took the floor to comment. Many of these members agreed with the US that there was no power under the DSU or the WTO Agreement giving the Appellate Body authority to issue rulings that set binding precedent, but several members questioned whether the Appellate Body was asserting such an authority.

Several said the "cogent reasons"pronouncement which the US claimed the Appellate Body was asserting in "Stainless Steel" was not correct and that in fact the Appellate Body said in the same ruling that it "is well settled that Appellate Body reports are not binding, except with respect to resolving the particular dispute between the parties". There is a difference between previous rulings setting binding precedence and previous rulings serving as guidance for the Appellate Body and panels to refer to; WTO members themselves, including the US, often refer to previous rulings when making their arguments before a panel or Appellate Body. In fact, they noted, Article 3.2 of the DSU specifically cites the role of the dispute settlement system in providing security and predictability to the multilateral trading system, and reference to these previous rulings, as appropriate, helps fulfill that role. Several other members, such as China and Colombia, said that US concerns on the matter were no reason for the US to continue holding up the appointment of new Appellate Body members.

Appellate Body appointments

Mexico, speaking on behalf of 71 WTO members, once again introduced the group's proposal calling for the establishment of a selection committee for the appointment of new Appellate Body members, the submission of candidates within 30 days, and the issuance by the committee of recommendations within 60 days. Four vacancies now exist on the Appellate Body, which normally has seven members, with two more members due to depart in one year. The considerable number of members supporting the proposal reflects a common concern with the current situation in the Appellate Body that is seriously affecting its workings and the overall dispute settlement system against the best interest of its members, Mexico said.

The United States again said it was not in a position to agree to the proposal. As it explained in previous meetings, the US said the systemic concerns it has identified remain unaddressed; for more than 15 years and across multiple US administrations, the US has been raising serious concerns with the Appellate Body's disregard for the rules set by WTO members. This includes the mandatory 90-day deadline for issuing rulings, the review of panel findings on domestic law, the issuance of advisory opinions not necessary to resolve a dispute, the treatment of Appellate Body reports as precedent and  Rule 15 of the Working procedures for appellate review, which allows the Appellate Body to decide whether a member continues working on cases after his/her term as an Appellate Body member has ended, in disregard of WTO rules. The US remains ready to engage with other WTO members on these issues and other critical issues.

Seventeen members, speaking on their own behalf or on behalf of groups, made statements. They reiterated their concerns with the continued impasse regarding the appointment of new Appellate Body members and urged all members to show flexibility in order to resolve the deadlock as soon as possible. The EU reminded members that with each passing month, the gravity and urgency of the situation increases. Many said again that while they were prepared to discuss the US concerns, they should not prevent the appointment of new Appellate Body members. 

Costa Rica (for the group of Latin American and Caribbean members), Brazil and China said there was nothing in the WTO rules which required consensus among members to agree to the launch of the selection process. Mexico, for the 71 proponents, said it regretted that, for the 19th occasion, members have not been able to start the selection process and that there was no legal justification for the blockage, which is causing concrete nullification and impairment for many members.

Surveillance of implementation

The United States presented status reports with regard to DS184, "US — Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan",  DS160, "United States — Section 110(5) of US Copyright Act", DS464, "United States — Anti-Dumping and Countervailing Measures on Large Residential Washers from Korea", DS471, "United States — Certain Methodologies and their Application to Anti-Dumping Proceedings Involving China" and DS488, "US — Anti-Dumping Measures on Certain Oil Country Tubular Goods from Korea".

The European Union presented status reports with regard to DS291, "EC — Measures Affecting the Approval and Marketing of Biotech Products".

Indonesia presented its status report in DS484, "Indonesia — Measures Concerning the Importation of Chicken Meat and Chicken Products".

Next meeting

The next meeting of the DSB will take place on 28 January 2019.

More information on WTO dispute settlement is available here.

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